Why Target’s Private Label Strategy is So SuccessfulNovember 06, 2020 - by Taylor Getler
In 2019, Target’s quarterly revenue and same-store sales exceeded analyst expectations by millions of dollars, with a lot of this growth attributed to their private label brands. Just last month, Target announced that they were doubling the SKUs offered under their in-house Good & Gather™ brand, which was unveiled last year as their new flagship brand to replace Archer Farms™ and Simply Balanced™.
So why is Target so exceptionally successful with their private label offerings? If retailers want to see the same kind of interest in private label products from consumers that Target has been able to achieve, they’ll have to study the company’s winning strategy.
Private label should mean specialized, not just cheap
One thing that separates Target’s private label brand from those owned by other retailers is that Target’s products tend to have a craft, small-batch feeling. Target seems to understand that when it comes to private label, it’s not just about having low prices – it’s about offering value, which means delivering both affordable pricing and high-quality products. Some of the new product releases recently announced by the company include uncured pepperoni pizza with spicy honey drizzle, brie and berry jam bites, and butternut squash pasta sauce.
This commitment to innovative products that are in line with cutting-edge food trends has transformed shopper perception of private label products. Customers don’t see these “store brand products” as cheap knockoffs of national brands – rather, these products feel specialized and exclusive, which is vital for driving shopper loyalty. When retailers compete on price only, they constantly risk losing customers to the lowest bidder. To be truly competitive, retailers have to focus on delivering unique, high-quality products that keep customers interested.
Strong design builds identity and drives storytelling
Target is also unique among competitors because they have such a strong focus on good design. While many private label products are indistinguishable from each other across retailers, Target’s products are very distinct and recognizable as Good & Gather™.
Target’s corporate website even describes the company’s philosophy around their design-first approach, a manifesto that they call “Design for All”: “Design for All is what sets Target apart from the pack. To us, design means taking the expected and making it extraordinary. Be it products, brands or services—we design every detail to inspire our guests and meet their needs. Our goal is to make every family’s Target Run convenient, relevant, affordable and packed with joyful experiences they won’t find anywhere else.”
If the quality of the product itself elevates its value to the consumer, then the quality of a private label brand’s design elevates its ability to become part of the consumer’s overall lifestyle. Because Target has invested in thoughtful design for Good & Gather™, it has become a lifestyle brand that allows the company to foster a deeper connection with shoppers. This drives shopper loyalty even further, which is reflected in Target’s revenue.
Target is a model for what a great private label strategy can look like. Their three distinct areas of investment are R&D, trend research, and design, which has resulted in a flagship private label brand that grows sales and gets consumers excited about shopping for groceries at Target. For retail leaders that are looking to compete in private label, Target’s approach has proven that the best path to victory is to give shoppers exactly what they want: affordable prices, products that are exclusive and high quality, and strong design that makes them feel proud to shop for that brand.